Foxconn chairman pledges to raise pay in China, invest in Hainan

April 01, 2012|Lee Chyen Yee and Jeanny Kao | Reuters

(Pichi Chuang Reuters, REUTERS)

BOAO, China (Reuters) - Foxconn Technology Group will keep on increasing worker salaries in China and cutting the hours of work, Chairman Terry Gou said on Sunday, after it came under fire for poor working conditions for employees making Apple iPhones and iPads.

As part of its efforts to relieve the pressure on its existing factories in Chinese cities such as Shenzhen and Chengdu, Gou said Foxconn would be building high-tech manufacturing facilities in Hainan, as well as expanding operations in Brazil.

"We are a saying now in the company, 'you work fewer hours, but get more pay'," Gou told Reuters at the 2012 Boao Forum for Asia in China's Hainan island province. "We won't stop here and will continue to increase salaries."

"Salaries in Brazil are even higher but we will continue with our investments there. We've just entered a deal with Hainan Airlines and they will eventually be our way of connecting our supply chain (from China to Brazil)."

The 61-year-old Taiwanese tycoon said Foxconn would lift workers' overall salaries as some employees at its sprawling factories in Shenzhen had complained that they would not make enough money if hours were reduced.

Apple and Foxconn agreed last week to improve conditions among the 1.2 million workers assembling iPhones and iPads in a landmark decision that could change the way Western companies do business in China.

The move is in response to the independent Fair Labor Association's findings of violations of labor laws by Foxconn, such as letting long work hours and unpaid overtime.

Foxconn now supplies 50 percent of the world's consumer electronics, with its units assembling handsets for the industry's best known names such as Nokia Oyj and Huawei Technologies Co Ltd, apart from Apple.

"The result we expect is additional hiring to cover the shortfall in labor hours following the reduction of overtime, as well as increased investment in automation equipment to reduce the future impact of continued wage increases in China," HSBC analyst Jenny Lai said in a report.

Foxconn has also been diversifying into other Asian markets, such as Vietnam, partly to reduce its reliance on China, though the move has been limited so far.

"Vietnam's development hasn't been as fast as China," said Gou, who is Taiwan's third richest man according to Forbes.

He added that Foxconn saw Hainan developing as one of its manufacturing bases in the southern part of Asia although some incentives, such as taxes, and the availability of labor still needed to be ironed out.

"We'll be breaking ground in Hainan at the end of this year and the facilities will be making high-tech products - that I can say. But as to what kind of products and other details, I can't divulge too much now," Gou said.